The Federal Reserve is refusing to disclose documents to Congress regarding the bailout of the American International Group (AIG), according to Neil Barofsky, the special inspector general for the Troubled Assets Relief Program.

This prompted both Democrats and Republicans to demand the documents’ release, as Rep. Ed Towns (D-N.Y.), chairman of the House Oversight and Government Reform Committee, issued a subpoena for the documents on Tuesday.

“This subpoena will provide the Committee with documents that will shed light on how and why taxpayer dollars were used for a backdoor bailout,” Towns said in a statement.

The House oversight panel had asked the special inspector general’s office for all “communications referring or relating” to the Fed’s decision allow the $85 billion bailout of AIG that later increased to a total of $182.3 billion.

In a Tuesday letter to Rep. Darrell Issa (R-Calif.), the ranking member of the oversight committee, Barofsky wrote, “the Federal Reserve has directed us not to provide you with the documents that it has provided us, and that it will instead respond to your request directly.”

“While we regret the Federal Reserve’s position in this matter, production of the requested documents absent the consent of the Federal Reserve in these circumstances could severely limit our ability to receive documentation from the Federal Reserve and other agencies in the future,” Barofsky wrote.

Issa in turn wrote a letter to Towns, asking the chairman to subpoena the documents from the Federal Reserve Bank of New York. Towns obliged shortly after Issa made his letter public.

“Both history and experience show that efforts by government agencies to prevent full disclosure of relevant documentation serve only to awaken public consciousness to the increased possibility of waste, fraud and abuse,” Issa said in his letter to Towns.

Issa, who initiated the probe into the AIG bailout, requested documents from the special inspector general of TARP after the New York Fed had previously denied him access to documents.

In a Nov. 17, 2009 letter, New York Fed President William Dudley told Issa, “Consistent with the New York Fed’s past practices, in the absence of a subpoena from the committee, we have included only public documents in our production.”

Treasury Secretary Timothy Geithner was the president of the New York Fed at the time of the 2008 AIG bailout. E-mails obtained by Issa’s staff show that officials with the New York Fed apparently told AIG officials to withhold information and documents from the Securities and Exchange Commission.

Issa and other Republicans on the committee want to know what role Geithner played in the matter.

Thomas Baxter Jr., general counsel at the New York Fed, said Geithner “played no role in, and had no knowledge of, the disclosure deliberations and communications referenced in those emails,” the Wall Street Journal reported.